EURUSD Slides As ECB Shrugs At LTRO-Implied Deleveraging

It seems the FX market is just a little edgy this morning. A few brief words from ECB member Benoit Coeure on the possibility of short-term LTRO repayment (if rates are cut to negative) appears to have reminded traders that LTRO does have a deadline and that several hundred billion in loans will inevitably be repaid from the LTRO1 and LTRO2 treasure chest. This reminder of implied deleveraging of the ECB's balance sheet triggered a drop from 1.34 to 1.33 overnight as the verbal intervention continues. The concerns over LTRO repayments has also triggered some serious "violent and quite extreme" snaps in EURIBOR yesterday as short-term refunding may become more difficult with a less large cash reserve standing around (waiting to be fungibly used as risk capital).